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Here is a summary of the administrative, legal, financial, and tax steps to embark on a regulated or unregulated liberal profession.
France has 1.7 million self-employed professionals, whether their activity is regulated or not. Each year, more than 300,000 professionals establish themselves under this status. Working as a self-employed professional means practicing your professional activity independently, most of the time under your own name even though it is also possible to opt for a company, notably to share costs. The range of activities that can be carried out as a self-employed professional is very wide. In fact, there is no specific list. However, it is necessary to distinguish between: - Regulated professions, which require a permit to establish and depend on obtaining a particular diploma or even registration with the corresponding professional order, - Non-regulated professions, which are free to practice. Among the regulated liberal professions or those requiring professional qualifications, we find notably: - Health professions (physician, midwife, dentist, physiotherapist, speech therapist, orthoptist, nurse...), - Legal and financial professions (lawyer, notary, bailiff, judicial representative, chartered accountant, statutory auditor...), - Certain technical professions (architect, chartered surveyor, land expert...). There is no list of all other eligible activities. All those that do not fall within the scope of regulated activities may be concerned. These may include, for example, consulting, communication, graphic design, web development, coaching, secretarial work, private teaching, content creation… To set up as a self-employed professional, the first step will consist in determining your activity and, if necessary, registering with the corresponding professional order or body (order of chartered accountants, architects, order of nurses, etc.).
A liberal professional can operate under their own name. Administratively speaking, this solution is fast and convenient. However, it has the drawback of not separating personal assets from professional assets. If the activity or the business plan requires it, it's possible to opt for the new status of sole trader or EI (which replaces the EIRL as of May 15, 2022). This status automatically provides this protection. If the goal is to work with several colleagues within the same medical office or premises, it is possible to opt for a Professional Exercise Company (SEL). This can be a limited liability company (SELARL), based on a model similar to that of the LLC, simplified joint-stock companies (SELAS) close to the SAS, or be created in the form of a Civil Professional Corporation (SCP). In this case, it is better to consult a lawyer to draft statutes that will suit all partners and anticipate separation cases.
In order to engage in independent practice, you must declare your business by registering with various organizations within 8 days of starting. Since January 1, 2023, all administrative procedures can be carried out through the « one-stop shop », which has replaced the old business formalities centers (CFE). Independent professionals will be pleased to no longer have to register on the URSSAF's CFE site, which had become quite archaic over time. Available on the formalites.entreprises.gouv website, this portal managed by INPI replaces various procedures and allows for digital registration. The information is then transmitted to the relevant authorities. It is still advisable to inquire about the status of the case with each one, in order to be sure that it has been accurately opened with social security, URSSAF, the pension fund, etc. Beware, because those engaged in a regulated activity will need to provide a certificate from the professional body they belong to, confirming their license to practice.
Practicing a liberal profession requires opening a dedicated professional bank account. This will help separate personal accounts and professional cash flows. It provides better visibility on cashflow and enables a better accounting management. Most banks, whether they are traditional, online, or neobanks, offer professional accounts. When choosing, the price is obviously an important criterion. But it should not be the only one. The method of collection, associated services and, if necessary, proximity to banking advisors also come into play. In short, it all depends on the needs.
It should be noted that for liberal professions, the submission of annual accounts is not mandatory. However, this does not exempt one from keeping accounting records up to date. Since 2014, self-employed individuals are required to provide a file of accounting entries (FEC) upon request by the tax authorities, as well as a general ledger and a journal. For this and for the management of social charges and taxes, it is preferable to call on an accounting firm that is familiar with liberal professions and the field in which the professional operates. This allows you to lighten the administrative workload and avoid mistakes. Some offer their online accounting services in a dematerialized manner, some are more traditional. Here again, the best solution depends on the professional's habits and objectives. Liberal professions can also call on an approved management association (AGA) or an approved management center. Some are even required to do so. The AGAs are tasked with verifying the accounting and tax declarations of professionals working on their own behalf. They can also submit the file to the tax services.
Another administrative step is to take out a professional liability insurance, also known as PLI. For some professions, particularly regulated ones, it's mandatory to cover any potential damages caused to third parties within the scope of the activity: errors, negligence, faults... Nobody is safe. So, even without obligation, this insurance is just as essential for the continuity of the activity in case of a hard blow. The rates for PLI vary greatly depending on the activity and the contract. Some insurances specialize in specific areas. To choose, it's better to turn to colleagues to collect their feedback, or to your professional organization. Some secure advantageous rates for their members.
Economic activity equates to social security and retirement contributions. Therefore, one of the typical questions from individuals setting up as independent professionals concerns the level of their social contributions. Roughly speaking, social charges for independent professions amount to about 30% of the turnover minus the expenses related to the activity, excluding remuneration. In other words, operational expenses (rent, electricity, equipment...) must be subtracted from the gross revenue. About 70% of this sum will roughly correspond to the net pre-tax income. For example, for an annual turnover of 60,000 € and expenses of 10,000 €, the social contributions will be calculated on 50,000 €. There will be approximately 15,000 € of charges (50,000 x 30%), and the net pre-tax income will therefore be around 35,000 €. This rate can increase or decrease based on numerous criteria, among which the exact profession, or the agreement for doctors. It is crucial to watch your expenses at the beginning of the activity. For the first 2 years, the professional will have to pay flat rate contributions for basic retirement, social security, CSG/CRDS, and sickness-maternity. For regulated professions, the calculation is based on 19% of the annual social security ceiling (PASS), meaning a base of 8358 € for a full year. For others, it's 19% of the PASS for basic retirement, supplementary retirement, and the invalidity/death regime (8358 €), and 40% of the PASS for sickness (17597 €). Be aware that from the 3rd year onwards, contributions will be based on projected income in relation to the income from previous years. Moreover, the amounts paid for the first year will be regularized, either upwards or downwards. It's better to plan some extra liquidity to be able to pay everything, without forgetting the income tax (saving 50% of the funds received seems a good option).
The pension fund depends on the professional activity. Most regulated professions have their own fund, others are grouped together within CIPAV. - CAVAMAC is dedicated to insurance agents, - CARCDSF takes care of dentists and midwives, - CARMF manages pensions for doctors, - CARPIMKO is for nurses, physiotherapists, podiatrists, speech therapists, orthoptists, - CARPV manages pensions for veterinarians, - CAVEC is in charge of chartered accountants and statutory auditors, - CAVOM takes care of ministerial officers, public officers, and court companies, - CAVP is dedicated to pharmacists, - CRPN concerns notaries, - CNBF takes care of lawyers, - The CIPAV insures 150 other professions including architects and building professions, mountain professionals, some health professionals such as psychologists and dietitians, artists outside artist houses, and certain experts. Since January 1, 2023, Urssaf is responsible for collecting its contributions.
Since the demise of the very criticized RSI, most liberal professions are affiliated with the social security fund for the self-employed (SSI) for health-maternity branch and CSG-CRDS. However, when they are registered, doctors and health professionals who fall under the definition of medical auxiliaries are affiliated to the regime of registered practitioners and medical auxiliaries (PAMC). This is managed by the general social security system. 9. Liberal professions tax: income tax, VAT and CFE
The taxation of a liberal profession is based on the generated revenues. Each year, the taxpayer will declare his turnover to the income tax in the category of non-commercial profits (BNC). If these receipts are less than €72,600 per year (pro-rata the first year of activity), a lump-sum reduction of 34% is deducted to determine the profit on which the tax will be calculated. For a turnover of €60,000, the allowance will therefore be €20,400 and the amount considered for the calculation of income tax (IR) will be €39,600. It is also possible to choose the actual tax system, called controlled declaration regime - 2035. The latter is also mandatory above €72,600 annual revenue. It allows deducting actual costs from the revenues and thus becomes interesting as soon as the costs exceed 34% of the turnover.
While certain regulated professions are exempt from VAT, others can choose to apply it or be obliged to. Here again, it is possible to opt for the actual regime. Professionals with an annual turnover of less than €36,500 can benefit from the franchise based on VAT. In this case, they do not invoice VAT but cannot deduct it from their expenses. Those whose turnover exceeds this threshold or who wish to opt for VAT can join the actual regime. They will add the current VAT rate to their excluding tax fees and can recover the VAT paid on purchases. At the end of each period, the professional or his accountant must send a VAT declaration to the tax administration. If the amount of disbursed VAT (that is to say, paid during expenses) is greater than the amount collected (that is to say, cashed when customers pay an invoice), he will benefit from VAT credit refundable by the taxes or carryover to the next period. Conversely, he will have to pay the tax the amount collected in excess. Our detailed article on VAT recovery is here.
The CFE, or company land contribution, is a local tax due for any non-salaried economic activity that operates in a premise. The annual deadline is set for December 15 each year. Its amount is linked to turnover and can range from several hundreds to several thousand euros. Professionals are exempt the first year of activity and benefit from a 50% reduction the second year. The tax system and the status of liberal profession are full of subtleties that we cannot expose here. Do not hesitate to get closer to a chartered accountant, an order, or a professional organization, or even a specialized lawyer to go further.10. Anticipate a supplementary pension with a tax-exempt PERWhile liberal professions contribute to the basic pension and supplementary pensions, many wish to build up savings to prepare for their retirement. In addition to the classic solutions (real estate investment, investments), they can subscribe to a retirement savings plan (PER). This investment, close to the life insurance multi-support model, aims to invest in financial support to build up capital and/or a pension recoverable at retirement. Several management modes exist. The one that is often put forward by insurers is based on a « management controlled by horizon ». The saver chooses the return/risk couple he is prepared to take between a prudent profile (low risk and return potential), a dynamic profile (high risk and potential), and a balanced profile. In any case, savings are secured to a euro fund by steps as retirement approaches. It is also possible to manage one's placements oneself or to entrust a mandate. Unlike life insurance, which offers more or less the same type of services, it is not possible to recover one's savings before retirement (except for life's incidents). But the advantage is that the payments can be deducted from taxable income. For the self-employed, the ceiling of deductions corresponds to the higher of the amounts corresponding: - either to 10% of the taxable profit in 2022 (limit of €351,936 + 15% of the taxable profit between €43,992 and €351,936) - or to €4,114 + 15% of the taxable profit between €43,992 and €351,936. However, be careful, because if the payments are tax-exempt at the entrance, withdrawals are subject to tax at the exit. Also, the investment is subject to market uncertainties: the savings can lose value, or progress depending on the state of the stock market. There are a multitude of retirement savings plans on the market, with very different characteristics. We analyzed them in our PER comparator.
